Lawmakers in the House environmental affairs committee unanimously approved the bill.
Officials say it's possible up to 90 percent of homes in East Chicago have lead water lines.
The city attorney says nothing is certain at this point, and the city is still waiting on a response from the EPA.
Community groups on the east side of Indianapolis won a national award to redevelop an abandoned industrial site.
City officials told residents there were high lead levels recently measured in drinking water in the Calumet neighborhood.
Mayor Anthony Copeland told residents he sent letters to Gov. Mike Pence and Lt. Gov. Eric Holcomb requesting the emergency declaration.
The EPA found unsafe levels of lead in the drinking water of some homes.
President-elect Donald Trump says he wants to do away with unnecessary regulations, including the EPA's Waters of the U.S. rule.
Trump will nominate Oklahoma Attorney General Scott Pruitt to be the next Environmental Protection Agency administrator.
A new lawsuit is the first to single out DuPont and Atlantic Richfield, two chemical companies that have taken on legally responsibility for the hazards.